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By Tyler Durden

There is an eerie quiet across markets, one day before the year’s main risk event: with the UK referendum vote starting in less than 24 hours and results due out shortly after, it is as if even the algos have stopped frontrunning other algos, in a market so thin and illiquid even the smallest order can result in a gap, either higher or lower. As a result, European, Asian stocks and S&P futures are little changed ahead of Thursday, with the Stoxx Europe 600 Index swinging between gains and losses more than five times so far today.

As Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc. in Tokyo summarized: “what investors hate the most is uncertainty. Most are just waiting on the sidelines to see what happens.” Apparently Chihiro – as well as Janet Yellen – forgot that there is no such thing as certainty in the market, or least there wasn’t before central bankers took over.

So for now, as “sidelined” investors wait, the MSCI All-Country World Index was little changed following three days of gains as bookmakers’ odds implied there’s only about a one-in-four chance that Britons will opt to leave the EU in Thursday’s referendum, even as the FT poll of polls gives Leave a small advantage. Sterling rose against most of its 16 peers and shares in emerging markets advanced for a fourth day. Crude oil was set to close above $50 a barrel for the first time in almost two weeks following yesterday’s sharp drop in inventories according to API.

As we approach Friday, the first day when Brexit will be in the rearview mirror, the question is how much of a “Remain” vote has been priced in: global stocks have climbed in the past three days as odds of a so-called Brexit fell at betting shops after the murder of a U.K. lawmaker who favored staying in the EU on Thursday. The implied chance of a leave vote dropped to about 25 percent from 43 percent a week ago.

Here is how Deutsche Bank evaluates the market-implied odds:

The shift in opinion poll momentum towards ‘remain’ over the weekend has perhaps reversed a touch over the last 48 hours and the FT poll of polls is still forecasting a close run outcome. The betting market though suggests a much greater bias towards ‘remain’ and is currently predicting a 79.4% chance of success based on the Bloomberg indicator of political odds at bookmakers. That’s at the upper end of what’s been a wide range over the last month or so. Indeed the implied probability peaked at around 85% back at the end of May – where it held for some 10 days or so – before then toughing to a low of 61% intraday on the 16th June. So the probability is now 6% off the highs and 18% up from the lows. Whether this high number has an inbuilt expectation of a late shift towards the status quo (as with Quebec and Scotland …read more

Source: Eerie Calm Across Markets One Day Before The Main Event: Asia, Europe, US Unchanged

    

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Posted June 22nd, 2016 in Uncategorized.